Our Insights

Hate the Game, Not the Player. Spare a Thought for the Frontline Banker.

Dec 9, 2020 11:47:49 AM / by Andrew Laming

Andrew- cropped for social mediaAndrew Laming, Director, NZAB

Imagine this scenario for a moment.  

You’re a dairy farm owner

Your dairy farm manager is doing your monthly feed wedge and he notices that there is a gap in supply and demand due to a poor start to the pasture growth in the month.  

But it is an easy and logical fix - he tells you that he needs to put a bit more feed in plus change the ratio of the feed mix. You do the numbers with him and it all makes perfect sense and delivers a tidy little profit.

So you, as the farm owner, go and speak to your feed supplier about getting some extra feed and possibly a slightly different mix.   

Your feed supplier knows a lot about dairy farming and a lot about feed.   

He knows that putting that feed in will make more profit.  

However, your feed supplier is not sure whether he should sell you that feed as he might be able to sell that feed for a better profit somewhere else.  

He is also a bit wary of selling feed to you, because you are a dairy farmer and he sells to a lot of dairy farmers already.    

You have always paid their bills, there is no issue there. Your farm is also having a fantastic year.   But your feed supplier is not interested in this.  

Eventually after plenty of time has passed and many discussions back and forth, you finally manage to agree with the supplier to get some feed - but only getting about half of what you need and it's also not really in the right mix ratio to get the most optimum performance.    

But you accept it - as what else can you do and its better than nothing.

The dairy farm owner goes back to the manager and tells him the news.  Rightly so, the farm manager cannot make any sense of this.

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This is Agri Banking right now

When you look at this analogy, it might be easy to think that the frontline banker is the feed supplier.  

But guess what - he’s not.   He is the farmer.  And this is what they must go through every day.

A frontline relationship manager’s job is to go out and understand the capital needs of their farmers as well as their business risk. In general, they do like their clients. They get involved with them as people and they live and breathe their wins and their losses.

But they are also caught in that uncomfortable position in between the needs of the bank and the needs of the farmers.  

Good bankers “negotiate” between those two “parties” effectively, but it is not easy.   

They are having to take something that makes absolutely perfect sense to you as the farmer and possibly even to themselves and then shape it into something that might be suitable for the bank.   And the bank’s decision makers then impart their own factors into that mix.  Factors which often have nothing to do with that particular farm or farmer. 

The relationship manager is continually negotiating between those two masters.  

And as much as both sides want a win/win, its often a win/lose, particularly if you are in the 30-50% of all farmers that probably can’t refinance to another “supplier”.

It's not a comfortable place to sit in between.

At the same time, good bankers do not want to be seen to be separating the bank from themselves.  They are the bank, and they will not hide behind that by attempting to appear “separate” from the bank. So this means that they will defend the bank’s position – which is entirely understandable.

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In a banking environment where first impressions are everything, you need to understand how banks think and control this process yourself.

All of the NZAB team are ex-frontline bankers who used to deal day in day out with both farmers and internal credit processes.   

We know the frontline bankers who work in this industry. They are good people and they want the best for their customers, but sometimes they are limited in what they can achieve or do due to regulations, limited time, bank policy and shareholder expectations about return.

Of course, there are other examples where the internal credit job has not been done to the required level to get the outcome that is required. 

But bad results can sometimes be as much about the quality and presentation of information as it is about the banker. Credit at a commercial level (this is Agri too) is a subjective process with many layers – how you as the farmer control that is the part that you should never leave to chance and why our customers engage us.

Bad results are also coming from bankers having to do much more with less time due to cost cutting in banks. There are now less people serving the farmers than what there used to be.    

Credit requests that aren’t presented well are going to get shoved to the side.  

And just as we’re asking farmers to remember that, we also ask senior bank leaders to remember that too when making tough decisions. There are people on the other end of those decisions – farmers and the frontline.  

Decisions have to be made and often with scarce resources and constraints, but when you make them – do it in the context of this:

 “If I had to deliver this message myself, how would I then communicate this message?”


And is this situation right?

I’ll leave you to answer that. 

But ultimately a functioning market sorts out these issues.  A functioning market has good competition with participants equally weighed on supply and demand. 

We don’t have enough of that in Agri.  

But things never stay the same.  Just as excess credit in Agri didn’t last, neither will the scarcity of it.  The market always self corrects.  

And when it does, farmers will be much more commercial with their approach to their bank and with significant financial acumen supported by the right independent advice around them.

And we think that’s a good thing.

Tags: Debt, Action, Planning, Budget, Banking, Strategy

Andrew Laming

Written by Andrew Laming